Wheat prices soared again amid talk that drought poses a
threat to wheat crops not just in the US but in Australia too, provoking a "historically
high drought premium" to prices, with dryness fears also spreading from Ukraine
into Europe.

Wheat soared above $7 a bushel in Chicago for the first time
since October, making decent gains in Paris and London too.

Wheat prices as of Wednesday's close

Chicago: $7.15 ¾ a bushel, (+3.4%)

Kansas City: $7.88 ¾ a bushel, (+3.3%)

Minneapolis: $7.61 a bushel, (+2.6%)

Paris: E213.25 a tonne, (+2.2%)

London: £169.95 a tonne, (+1.2%)

Values for May contracts

While the gains were primarily attributed to the
well-publicised concerns over dryness in the US, farmers in eastern Australia
are becoming increasingly unnerved that dryness, and which has already dented
yields of the newly-started sorghum harvest, will extend throughout the
planting window, and fail to allow sowings even in April

Growers need six inches of rain to plant, an amount that
would be "unseasonal", New South Wales Farmers warned, adding that "stress
levels are rising" among producers.

The rainfall deficit so far this year in Queensland and New South
Wales, between them typically responsible for more than one-third of national
wheat output, has hit 234mm (9 inches) so far Toowoomba in the Darling Downs,
excessing 100mm in many other parts, according to CliMate.

These shortfalls, "combined with a hot summer and high evaporation
rates clearly support the comments we are hearing from producers that they need
in the order of 6 inches (150mm) of rain – and soon - in order to plant a viable
crop", grain trader Pentag Nidera said.

'More severe threat'

The cautions come amid mounting concerns over dryness in the
US, where ratings for the southern Plains crop was downgraded this week again,
including in Kansas, the country's top wheat-producing state.

At Chicago broker RJ O'Brien, Richard Feltes said that "weather
leans positive [for prices] with confirmation today of much below normal temps
penetrating into southern US next week while majority of the US hard red winter
wheat belt leans dry".

Furthermore, there are continued concerns over dryness in
Ukraine, which RMI Analytics, the malting barley consultancy, said appeared to
be a bigger threat to the 2014 harvest than that of the country's crisis
denting spring sowings.

"Dry conditions seem to be a more severe threat to the crops
and will have to be closely watched as some regions report having received only
up to 50% of the normal average precipitation in the last three months," RMI
said.

Separately, Agritel said that "during the last six months,
only 50% of the normal level of precipitations has been registered in the
European part of the Black Sea basin".

"Significant rains are not forecasted for the following days,
ensuring good conditions for sowings to advance but increasing fears concerning
low soil moisture levels," the analysis group said.

'Timely rains needed'

The dryness fears have spread further west into Europe too,
with RMI cautioning that "both in France and in Germany timely rains are needed
now as the soil conditions are a bit dry after this winter".

Gail Martell at Martell Crop Projections said that the "most
serious drought is in Bayern, southern Germany, where winter rainfall was less
than 50% of average.

"Troublesome drought has continued in March," and indeed "seems
to be spreading into Poland another important wheat-producing country", the
third ranked in the European Union in grains output overall.

One European commentator told Agrimoney.com that "Central
Europe could definitely do with a bit more rain once plantings are over", with
the Czech Republic seeing just 44% of normal rainfall.

'Drought premium'

In Australia, the lack of rainfall has injected a "drought
premium" into prices being offered in the Darling Downs, an important feedlot
area, Pentag Nidera said, with new crop APW wheat in Brisbane, at Aus$324 a
tonne, trading at a premium of Aus$30 a tonne to the South Australia export
market.

"Despite these historically high forward prices in southern
Queensland, the phones ain't exactly ringing off the hook - hardly surprising
given the massive rainfall deficits," the broker said.

"The collective ag sector in northern New South Wales and
Queensland is starting to sweat on rain as the winter crop planting window
looms under warm, dry autumn skies."

Already the dryness had meant prospects for sorghum production
"deteriorating toward 1.2m tonnes", down from Pentag's forecast of 1.3m tonnes
last month.

Sorghum downgrade

The US Department of Agriculture last week slashed its
forecast for the Australian sorghum crop by 700,000 tonnes to 1.2m tonnes, warning
that a "severe lack of summer rainfall delayed planting in many growing areas
and reduced potential yield.

"In addition, record high temperatures further stressed the
crop already struggling with a lack of soil moisture."

Australia's official Abares commodities bureau, which last
month cut its forecast for the sorghum harvest to 1.28m tonnes, pegs last year's
harvest at 1.44m tonnes.